How Streaming Is Changing Music (Again)

Beyoncé made history with her album Lemonade, which was streamed a record 115 million times in its first week. Just one week later, Drake broke that record when his album Views was streamed 245 million times. The age of streaming music has arrived in full force, displacing both physical sales (e.g., CDs) and downloaded songs (e.g., iTunes). As streaming has taken hold, U.S. album sales, both physical and digital, have plummeted from a peak of 785 million in 2000 to just 241 million in 2015. The change comes from people switching from purchasing full albums, either online or offline, to listening to individual songs through a streaming platform such as Spotify, Tidal, or Pandora (where one of us works, full disclosure).

This shift has the potential to reshape both the music people listen to and the music that artists create. For example, will the concept of albums survive in the age of streaming, or will artists simply release their best singles? (History buffs will note that the concept of recorded albums is itself relatively new.)

As music fans, we wanted to get a sense of the evolving music landscape. Looking at the academic research on the topic and our own data set of 2,400 top-selling albums from 1992 to 2015, two patterns about music quality emerged.

The “Long Tail” Is Easier to Find and Cheaper to Make

Digitization has brought new strategic challenges, and falling revenue, to the industry. Yet it has also brought new opportunities to a wider variety of artists. By reducing search costs, the digitization of music makes it easier to discover new artists and albums.

Despite early concerns that falling revenue (and online piracy) would reduce the availability of music, research by economists Luis Aguiar and Joel Waldfogel shows that the number of music products created between 2000 and 2008 tripled. Skeptics may worry that quantity is coming at the expense of quality. Music quality is, of course, in the eye of the beholder, and some people surely think that music has been on the decline since the death of Tchaikovsky. Focusing on the narrower context of recorded popular music albums from 1960 to 2007, Waldfogel created metrics aimed at capturing the quality of music, such as whether an album ended up on critics’ lists of all-time best albums and the extent to which an album continues to be listened to in future years. (These metrics capture things such as critical acclaim and staying power in the eyes of listeners, focusing on how new and older music compare.) The data suggests that the quality of music has actually improved in the digital age. It is easier to find and less costly to release new music, leading to unpredictable successes from artists who might not have been discovered or produced an album in an earlier era.

While music is still an industry associated with superstars, a greater variety of artists are producing best-sellers over time. Looking at the data, the sales going to the top 100 albums has dropped by about 20% over the past 20 years — nontrivial gains for other artists.

With subscription pricing and the ability to easily skip among artists (as opposed to per-album or per-song charges, which were the norm), streaming pushes users to listen to explore new artists. This has the potential to reduce the concentration of the very top artists and albums, while also helping music lovers find what economists refer to as the “long tail” of the industry. In other words, it’s easier than ever before to find an artist like Julia Nunes, a ukulele player doing cover songs of pop bands who was first discovered through YouTube.

Average Album Length Has Changed Over Time

The quantity and quality of music are not the only things that are changing. In 1992 cassette tapes were the predominant form of consumption in the U.S. and albums averaged about 12.5 tracks. The rise of compact discs brought about better functionality to skip around to different tracks and to know what song you were listening to. (Hidden tracks also suddenly became not so hidden.) As compact discs became the norm, the number of songs per album increased, averaging 15.8 at its peak in 2003.

Around this time, online music started becoming popular and album length began to fall — today it’s about 14.17 tracks. It has been holding steady for about five years but may still be in flux, as artists are figuring out how to adjust to the streaming age.

While many factors affect album length, this raises the potential of adjusting creative content in response to new modes of distribution. When albums are less popular relative to, say, song downloads, albums might become shorter. “Filler” tracks, less popular songs that are not released as singles, serve a diminished purpose. For example, all 12 tracks on Lemonadedebuted on the Billboard Hot 100.

What’s Next?

For the industry, these changes raise strategic questions, not only about contracts and pricing but also about which types of artists will thrive and what content artists should be producing. Artists like Drake and Beyoncé show that the concept of an album is still relevant, in part because of innovations such as the visual album. Beck’s 2013 book of sheet music, Song Reader, was innovative in a different way, leading fans to post their own versions of the album online. For example, there are now dozens of versions of the song “Old Shanghai” on YouTube, on instruments ranging from a toy piano to a ukulele.

The Chainsmokers show an alternative path to the album. First known for their 2014 hit “#Selfie,” the band has foregone full-length albums and instead released 10 separate singles and official remixes, which have sold 2.6 million downloads and been streamed over 600 million times on Spotify alone.

For artists, it is a time of reflection and increased strategic options. And for music lovers, it is time to sit back and listen.

Michael Luca is the Lee J. Styslinger III Associate Professor of Business Administration at Harvard Business School.

Craig McFadden was an early member of the YouTube music team and now manages content licensing at Pandora. He holds an MBA from Harvard Business School.